As the economic downturn seems to be slowly becoming a thing of the past, more and more people these days are looking to invest in real estate to capitalize on the low housing prices and historically low interest rates. If this is the first time you are in the market for a mortgage, you need to understand the difference between a mortgage broker and a lender, as you will have to deal with both of them. A mortgage broker is a mortgage specialist who helps you find the right lender and the right loan offer depending on your needs. Here is the difference between the two in detail:

Who is a mortgage lender?

A mortgage lender is a bank or any other financial entity that is offering you the loan. Although the initial funds for your mortgage come from the lender, it is not necessary that the mortgage will always be owned by the same lender. The bank can choose to keep the mortgage in its portfolio or to sell the loan to other investors. In fact, these days, banks rarely keep mortgages in their own portfolio. These new investors are at risk in case of a default by you but they don’t actively participate in servicing the mortgage. The investment unit assigns a management company, which becomes responsible for managing the mortgage.

Who is a mortgage broker?

The expertise of a mortgage broker becomes useful to you way before you approach the mortgage lender. This trained mortgage specialist helps you assess your current financial situation, credit score, and the economic conditions to determine what kind of mortgage best suits you.

A mortgage broker is a professional who brings the mortgage borrowers and the mortgage lenders together. He helps you manage all the paperwork and understand the fine print of the mortgage contract. He then passes on the paperwork to the mortgage lender and negotiates on your behalf for a better interest rate or better terms of loan agreement.

These specialists also work towards getting loans for people who have been unable to find a lender on their own because of bad credit history. Being experienced professionals in the field, they have the contacts to convince a lender for a mortgage loan under terms and rates that are not as bad as you would normally expect with someone with a poor credit. The broker never uses any of his own money to initiate mortgages or to fund them. He offers his services for a fee or for a commission, which is equivalent to a small percentage of the mortgage loan.

Discussing your finances with a mortgage specialist can help you determine the realistic level of monthly payments you can make without hurting your savings. Making these monthly repayments is vital as default could mean potential foreclosure and a blemish on your credit history for many years. Having a good broker on your side can often save you thousands of dollars and a lot of future hassles.

Author Bio: For more information on home equity loans or to talk to mortgage brokers in Canada, contact Canadian Mortgages Inc.

Category: Finances
Keywords: mortgage lender, home loan, mortgage broker